New investment approaches

One of the most frequently asked questions in the global economy is: how long will our oil resources last? In all probability there will always be oil reserves. The real issue, however, is whether oil reserves can be extracted and at what cost. This depends on the quantities of oil required in the next years and decades and how much can be extracted. No major new oil fields have been discovered for many years. Technical progress in extracting oil has made it possible to exploit oil from known sources which were previously economically unviable.

Experts at the Federal Agency for Geosciences and Raw Materials in Hanover have estimated that conventional oil production (excluding tar sands and shale etc.) will peak between 2008 and 2023. After this period, the production quota will fall even though the world-wide energy demand will continue to rise. In 2004 alone, demand for oil rose by approximately five percent to 3.87 billion tonnes. In some newly industrializing countries, particularly in China and India, oil consumption is recording two-digit percentage growth figures. This is pushing up prices and is noticeable at the filling stations.

Tankers instead of pipelines

So urgent consideration needs to be given to finding alternatives. One of those alternatives is natural gas. Natural gas is cheaper to extract than oil, exists in larger quantities and is available all over the world. And the Gas-to-Liquid (GtL) method enables natural gas to be converted into high-grade synthetic fuels. Natural gas-based synthetic diesel fuel (Synfuel) is much cleaner in combustion than conventional diesel and permits the development of entirely new, more economical and lower-emission engines, such as the Combined Combustion System. Volkswagen, too, is basing its drive system and fuel strategy on the broad spread of GtL fuels, which it sees as a transitional phase on the way to delivering sustainable mobility by means of fuel derived from biomass (Sunfuel).

The most promising source of natural gas for the production of GtL is in remote areas where extraction based on conventional methods would not be commercially viable. In contrast to natural gas, GtL produced directly at the point of extraction does not have to be pumped along cost-intensive pipelines – often for several thousand kilometres – to get to market, but can be flexibly and rapidly transported by tanker and ship. This is true, for example, of the North Field in the Arab Emirate of Qatar. The oil company Shell is currently investing five billion US Dollars in the tiny Gulf state in gas prospecting and in the world's largest commercial GtL plant.

Start of the Pearl Project

In July 2006, state-owned Qatar Petroleum and Shell announced the start of their joint Pearl project. It includes the construction of the world's largest plant for liquefying gas in Ras Laffan Industrial City in the North of Qatar. The plant is scheduled to start production at the end of the decade. The plant has a capacity of approximately 140,000 barrels per day of liquid hydrocarbons including naphtha, GTL fuels, paraffin, kerosene and lubricants. In addition, the plant will also produce 120,000 barrels of condensate, liquid petroleum gas and ethane.

"GTL opens a new global market for Qatari natural gas and allows Qatar to contribute constructively to improving the local environment by supplying a cleaner alternative transport fuel. Shell has extensive expertise in all aspects of the GTL value chain and I am pleased to have them as partners on our journey to become the GTL capital of the world", said Abdullah Bin Hamad Al-Attiyah, Minister of Energy and Industry. Chief Executive of Shell, Jeroen van der Veer, also underlined the significance of the project with this partner: "It is also evidence of our commitment to leverage leading Shell technology in order to increase the world’s supply of cleaner and more diverse liquid hydrocarbon products. Pearl GTL is just one example of Shell’s strong portfolio of growth opportunities."

Synfuels are becoming reality

Other petroleum companies, such as Sasol Chevron, the world's largest producer of coal-to-liquid fuels and natural gas, ExxonMobil and ConocoPhillips are also involved in planning the GTL plant in Qatar. For example, the ORYX project is a joint venture between Qatar Petroleum (51%) and Sasol Chevron (49%). The first phase of the plant, one of the world's largest and most technically advanced GTL plants with a capacity of 34,000 barrels per day, started production in June 2006. Both partners plan to increase the capacity of the plant to over 100,000 barrels per day. They are considering the construction of an integrated GTL plant with a capacity of approximately 130,000 barrels per day.

Sasol Chevron, based in London, will start worldwide marketing of the fuel this year. This is clear evidence that the second phase of Volkswagen's drive and fuel strategy – Synfuels – is becoming reality.